Next Week’s Economic Forecast

This week’s economic calendar is light but the impact could be big:

• New Home Sales will be released on Tuesday. This report comes after a drop in Existing Home Sales, Housing Starts and Building Permits. It would be nice to see some improvement – but the market expectation isn’t high.
• Gross Domestic Product for the 2nd quarter will be released on Friday, and investors will be waiting with bated breath for signs of weakening in the US economy. The initial read for Q2 came in low. If the second read is weak, Stock markets could move a leg lower and give Bonds a boost. But the report isn’t released until Friday, so Stocks and Bonds will fight for investing dollars throughout the week.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

As you can see in the chart below, Bonds and Home loan rates improved last week but tapered off a bit on Friday. Stock markets fell once again last week on fears of a double-dip recession. That coupled with a plunge in the Philly Fed Index along with weak housing numbers fueled a rally in the Bond markets that saw Mortgage Bonds hit fresh 2011 highs before giving up some of those gains on Friday.

Overall, however, home loan rates are still at some of the most attractive levels ever seen – making now a great time to consider a refinance or home purchase.

Fixed Rate Loans Remain Top Choice

Homeowners continue to flee to the safety of fixed rate mortgages, according to recent data from housing finance company Freddie Mac. And with interest rates remaining low, borrowers are also getting into shorter-term fixed rate loans.

The Freddie Mac survey showed that 95 percent of refinance loans in the second quarter of 2011 were fixed rate mortgages, a major shift from the housing boom days, when adjustable rate mortgages (ARMs) were extremely popular. A full 55 percent of those with hybrid ARMs opted for the security of a fixed rate loan during the same time.

What’s more, among those who refinanced a 30-year fixed rate loan in the second quarter, 37 percent chose a shorter term of either 15 or 20 years. That’s the largest share since the third quarter of 2003, a sign that many borrowers are taking advantage of the lowest rates with and trying to pay off their mortgages, rather than squeeze out their equity.

“Compared to a 30-year fixed-rate mortgage, the interest rate on 15-year fixed was about 0.8 percentage points lower during the second quarter,” Freddie Mac chief economist Frank Nothaft said. “For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term.”

Interest rates on 30-year fixed rate mortgages averaged 4.65 percent, excluding points and 15-year fixed rate loans carried an average of 3.84 percent, “well below long-term averages,” Frank Nothaft added. “…It’s no wonder we continue to see strong refinance activity into fixed rate loans.”

Refinance loans have made up most of the mortgage market business in the post-boom doldrums. The survey found that 70 percent of all loan applications during the second quarter were refinance requests. The low rates have made that a no-brainer for qualified homeowners, but the dismally low home-purchase applications are a sign that the housing market is not yet in recovery.

Original Article Written by:
Amber Nelson
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How Many Times Can You Refinance A Mortgage?

Homeowners often ask how many times they can refinance a mortgage loan. The short answer? There is no set limit to the number of times you can refinance the mortgage for a single property.

If interest rates steadily drop lower and lower it’s not uncommon to see homeowners go through a series of no cost refinances, lowering their mortgage rates each time. Adjustable rate mortgages remain popular with borrowers taking out jumbo loans due to the typically more aggressive pricing, leading to more frequent refinances as the introductory period of each loan comes to an end.

In some scenarios there may be restrictions on refinance loans. There is a law which prohibits refinancing a high rate, high fee loan (as defined in the Home Ownership and Equity Protection Act of 1994) into another high rate, high fee loan within 12 months unless it benefits the borrower (for example lowers the mortgage rate or the monthly payment.) This is to prevent the predatory lending practice of repeatedly convincing borrowers to refinance at a high cost even when it was not in their best interest.

Refinancing also may be limited by a pre-payment penalty if one is in place on an existing loan. A pre-payment penalty is a fee charged by the mortgage company should the loan be paid in full before a certain amount of time has passed. If your loan has a pre-payment penalty the amount of the fee should be taken into consideration to see whether the low mortgage rate or other benefit is enough to offset paying the penalty. In some cases it may be better to wait until the pre-payment period is complete.

Original Article Written by: Anna Platz
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Anna Platz is a writer and SEO Specialist focusing on mortgage lending, real estate, and personal finance. She gained experience in these areas during six years as the Director of Compliance for a national mortgage company. A graduate of the College of William and Mary, Anna’s work has appeared in many online and offline financial publications.

How Do Credit Scores Work: Take the Credit Score Quiz!

Credit scoring is that mysterious number that is assigned to your when  you apply for a mortgage, a car loan and your insurance company even runs one to determine your premium amounts.

So, there’s a new website, created by the Consumer Federation of America and Vantage Score Solutions if you’d like to know how credit scoring works.

www.CreditScoreQuiz.org

Thousands of people have taken the quiz—with the average score of 60%.  People between the ages of 34 to 45 got 67% right and people with income over $100,000 got 66% correct answers.  Consumer with lower income and the elderly scored lower.  They just don’t use credit enough to know how the scores affect them.

The quiz has 25 questions—and the website will give you the answer to those questions that you missed.

There are new credit scoring disclosure rules going into effect in July 2011 where lenders and the credit bureau must provide you with detailed information when you apply for credit.   It will help you understand your credit score and in finding errors on your report (that you may not even know about).  So stayed tuned!

Tweak Your Withholding Taxes: Filing a New W-4 Form with Your Employer

Remember filling out a W-4 form when you were first hired?  It’s the form that determines how much money your employer withholds from your paycheck to pay federal and state taxes—based upon the number of “allowances” that you claimed.

But have you checked to see if it’s still applicable?  Consider adjusting your W-4 form if the following applies:

• You owed the IRS money – You may want to have more money withheld from your paycheck.  In fact, if you owe too much, the IRS can assess you and add a penalty for not depositing enough money into your account.

•  You’ve experienced a “life change” like
• Marriage
• Divorce
• Birth or adoption of a child
• Purchase of home
• Refinance of mortgage
• Retirement

•  You expect to earn money from your home-based business or other source that does not withhold income taxes from the check.

•  Change in itemized deductions
• Medical expenses
• Gifts to charity
• Dependent care expenses
• Education credits
• Child tax credit

To INCREASE the amount of taxes from your paycheck, you will need to DECREASE the number of dependents.  You can also specify a dollar amount—like $50 per pay period.  Likewise, to have LESS money deducted, INCREASE that number.

I recommend that you check your withholding every year—right after you’ve filed your income tax return.  The IRS offers a withholding calculator at www.IRS.gov and you’ll need your most recent tax return and current paycheck stub.  Or, ask your tax preparer to help you adjust your withholding so you don’t own too much—or get a large refund from the IRS—at the end of the year.

Give me a call if you are purchasing a home in the near future. I will answer your questions, help you find solutions, and research the many loan options available to suit you best: http://www.utahsmortgageguy.com